Citigroup had two real choices for its post-Brexit E.U. headquarters: Dublin or Frankfurt - the only the two cities in the E.U. (London excepted) in which it has a full banking licence. It's chosen Dublin.
The Sunday Times says Citi's planning to, "move up to 900 jobs from London to Dublin" as it prepares for what looks like being a hard Brexit. The Dublin shift is a “project of substance”, says the Times: Citi's looking for an office that can house "many hundreds of people."
Surprised? Don't be. While Citi's move is a blow to Frankfurt's finance aspirations, Citi in particular was always likely to choose Dublin. This is why:
Ireland is de facto Citi's second centre in Europe. Citi employs 2,500 people there, across corporate banking, retail banking, treasury, fund administration and trade solutions. By comparison, Citi sold its German retail business, which employed around 5,000 people, after the financial crisis in 2008. It still has a corporate and investment bank in Germany, but this only has around 500 Frankfurt-based employees.
Citi moved its European retail banking headquarters from London to Dublin in 2015. At the time, it said it was doing so to benefit from lower costs and capital requirements. - Considerations which may also weigh upon its judgement of where to base parts of its investment bank.
Pay at Citi's Dublin office is low (none of the salaries there exceed €100k according to Glassdoor, while there are plenty of €100k salaries at Citi in Frankfurt, although this might be down to business mix). The Bank of England has been stricter than the ECB in setting capital requirements for banks considered systemically risky, meaning that Citi may derive capital advantages from being in Dublin (albeit no more so than if it were in Frankfurt).
Citi's prior involvement in Ireland means it's on friendly terms with Ireland's government. The Irish prime minister (The Taoiseach) came to open one of Citi's Irish offices in 2010. The bank also met with the current Taoiseach for an hour following its Irish board meeting last month.
When he was appointed in February 2016, Zdenek Turek, chief executive of Citi's retail bank in Ireland said Citi believed in Ireland as a "stable entity". This was echoed by the Sunday Times, which quoted a Citi insider as saying that the bank has been, "testing the Irish political and regulatory regime on a macro level.” With the Italy looking precarious ahead of its referendum and elections scheduled across Europe in the next two years, political risk is clearly a big factor for U.S. banks considering EU headquarters post-Brexit.
Shifting 900 jobs to Dublin does not necessarily mean shifting 900 people to Dublin. It's more likely to mean hiring 900 people anew.
Recruiting in Dublin can be hard - particularly for front office trading roles. Citi already employs some securities lending, FX traders and treasury traders in Dublin, but it's especially geared-up for hiring middle and back office staff in the city and already runs an "operations academy" there. It's been building its Irish legal department and runs a model risk validation team out of Dublin for the whole of Europe.
100 miles away in Dublin, Citi operates a fintech accelerator and a high-tech R&D lab. Given that Citi's Michael Corbat is part of the chorus of banking CEOs claiming to be running a "technology firm", Dublin is a great vantage point for picking off top tech talent.
Lastly, for all Frankfurt's not inconsiderable charm, bankers in London like the idea of Dublin a little bit more than they like the idea of Frankfurt. Dublin's closer, everyone speaks English, the weather is comparable. More than Dublin though, a poll of our users post-Brexit found that people want to work in Amsterdam or Paris. So maybe, Citi's missing a trick.